Lawmakers Call for Anti-Conflict of Interest Measures in Power Firms

Manila Electric Co. is ready to respond to electricity service concerns throughout the Holy Week break. CONTRIBUTED PHOTO
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To address the growing concerns surrounding cross-ownership in the power industry, lawmakers are calling for the strengthening of the ban on conflicts of interest. Sagip Party-list Representative Caroline Tanchay has emphasized the need for stricter regulations to prevent cross-ownership among power industry players. She has proposed House Bill 174, also known as the “Act Prohibiting Cross Ownership Among Distribution Utilities and Generation Companies,” which aims to amend Section 45 of the Electric Power Industry Reform Act (EPIRA).
Under the proposed legislation, distribution utilities would be limited to sourcing a maximum of 50 percent of their electric supply from an “associated firm.” This provision seeks to prevent any undue concentration of power within the industry. The bill cites the example of Manila Electric Co. (Meralco) to illustrate the issue at hand. Meralco, which owns Meralco Powergen Corp. (MGen), holds ownership shares in several power generating plants across the country.
Meralco’s ownership includes the 455-megawatt San Buenaventura power plant in Mauban, Quezon, a 237-megawatt coal-fired plant in Sarangani, and a 120-megawatt plant in Zamboanga City. Additionally, Meralco has entered into a joint venture agreement with San Miguel Corp. for the development of a 1,200-megawatt coal plant in Mariveles, Bataan, and has acquired majority ownership of the Ilijan power plant from San Miguel Corp.’s South Premiere Power Corp.
In a groundbreaking move, Meralco Powergen, along with San Miguel Global Power Holdings and Aboitiz Power, has announced a $3.3-billion deal to establish the country’s first and most expansive liquefied natural gas (LNG) terminal in Batangas. This terminal is expected to supply fuel for power plants with a total capacity of over 2,500 megawatts.
The proposed bill argues that Meralco’s actions, in contravention of the EPIRA law, have resulted in nearly 95 percent of the company’s power demand being contracted from associated firms. This concentration of power within a few entities is seen as detrimental to fair competition and consumer interests. The bill further asserts that Meralco’s actions have effectively “cartelized” the power industry, leading to prejudice and damage to consumers.
The urgency to address this issue and implement stricter regulations is highlighted by the potential harm to both industry players and the general public. By preventing cross-ownership and limiting the concentration of power, the proposed legislation aims to ensure fair competition, protect consumer interests, and promote a more transparent and accountable power industry. Moreover, the implementation of stricter regulations on cross-ownership would also promote transparency and accountability within the power industry. With clear limits on the percentage of electric supply that distribution utilities can source from associated firms, there would be a greater emphasis on fair business practices and preventing any form of market manipulation.
In addition to the benefits for consumers, a more diverse and competitive power industry would also have positive implications for the overall economy. Increased competition would drive down prices, making electricity more affordable for households and businesses alike. This, in turn, would stimulate economic growth and productivity, as businesses can allocate more resources to other areas of their operations.
Furthermore, a competitive power industry would attract more investments, both domestic and foreign. With a level playing field and a regulatory framework that promotes fair competition, investors would have greater confidence in the stability and profitability of the industry. This influx of investments would not only create job opportunities but also spur technological advancements and innovation in the sector.
Moreover, the promotion of cleaner and more sustainable energy sources would be facilitated by a competitive power industry. With more players in the market, there would be a greater incentive for companies to invest in renewable energy technologies and reduce their carbon footprint. This transition to cleaner energy sources would contribute to the global efforts to mitigate climate change and promote a more sustainable future.
In conclusion, the increasing trend of cross-ownership in the power industry raises concerns about fair competition and consumer welfare. The proposed legislation seeks to address these concerns by imposing stricter regulations on cross-ownership and promoting a more diverse and competitive power industry. If passed, this legislation would have far-reaching implications for the power industry and consumers, fostering innovation, driving down prices, and promoting cleaner and more sustainable energy sources. It would create a level playing field for all industry players, attracting investments and stimulating economic growth. Overall, the implementation of these regulations would benefit both consumers and the overall economy, ensuring fair competition and greater transparency in the power industry.

International Perspectives on Cross-Ownership and Conflicts of Interest

While the issue of cross-ownership and conflicts of interest in the power industry is not unique to any particular country, the approaches taken to address these concerns may vary based on local laws, customs, and regulatory frameworks.
In many countries, including the United States and European Union member states, there are strict regulations in place to prevent anti-competitive practices and conflicts of interest within the energy sector. These regulations aim to ensure fair competition, protect consumer interests, and promote the development of a diverse and sustainable energy market.
For example, in the United States, the Federal Energy Regulatory Commission (FERC) regulates interstate transmission of electricity and natural gas, ensuring fair access to transmission infrastructure and preventing undue concentration of market power. Additionally, the Public Utility Regulatory Policies Act (PURPA) promotes competition in the generation sector by requiring utilities to purchase power from qualifying facilities at reasonable rates.
Similarly, the European Union has implemented the Third Energy Package, which introduced measures to enhance market competition and prevent conflicts of interest in the energy sector. This package includes regulations on unbundling, transparency, and cross-border cooperation to create a more integrated and competitive European energy market.
However, it is important to note that while these regulations provide a framework for addressing cross-ownership and conflicts of interest, their effectiveness may vary depending on the specific circumstances and enforcement mechanisms in each country. Furthermore, the power industry is constantly evolving, and new challenges may arise that require policymakers to adapt and refine existing regulations.
Looking beyond the United States and the European Union, other countries have also taken steps to address cross-ownership and conflicts of interest in the power sector. For example, in Australia, the Australian Energy Regulator (AER) oversees the regulation of electricity and gas markets, ensuring that market participants comply with the rules and promoting competition. In Canada, the Canadian Radio-television and Telecommunications Commission (CRTC) regulates the telecommunications and broadcasting sectors, including issues related to cross-ownership and conflicts of interest.
These international examples provide insights into how other countries have addressed similar issues and may serve as a reference for policymakers in considering potential solutions within their own jurisdictions. However, it is important for policymakers to carefully evaluate the unique characteristics of their own energy markets and tailor regulations accordingly. By learning from the experiences of other countries and adapting best practices to their own contexts, policymakers can effectively address cross-ownership and conflicts of interest in the power industry, ensuring fair competition and benefiting consumers and the overall energy market.

Source: The Manila Times

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